The Impact Of VC To A Firm's Financing Capability

In China, because of its special investment style and its particular relevance with high-growth enterprises, venture capital develops phenomenally in today's economic practice.As we know, venture capital plays a very extensive role in the economic and in the firms they financed. And it is important to take full use of venture capital's features and advantages to play its positive impact on China's high growth enterprises. The focus of this article is to promote the financing behavior of domestic venture-enterprises and raise their financing capacity.In this paper, we first reviewed the domestic and foreign academics in venture capital and then briefly addressed principal-agent theory and Credit rationing theories which have a high relevance with venture capital, outlined venture capital's operating characteristics and operating rules.Here, we present a credit rationing model in terms of moral hazard to illustrate the real economy. Then, we list some of the main factors which can influence the enterprises'financing capacity. Next, we give a theoretical analysis which suggests that moral hazard, entrepreneur's own assets, enterprise quality, etc are the key factors which can determine the enterprises'financing capacity.And then, this article gives a high attention to the role of venture capital in overcoming the moral hazard and information asymmetry. Through the establishment of a financing model including value-added services and supervision we obtained the result that venture capital can affect corporate finance, improve the ability of financing and relax corporate finance constraints.Finally, we used collected data on the Shenzhen SME board of listed companies to establish a multi-regression model and the second-order least squares model to give a systematic analysis of the role of venture capital.Our main conclusions drawn from the analysis are that in the condition that all the other factors are fixed firms with venture capital are more likely to have a higher interest-bearing debt than the firms without venture capital which means firms with venture capital have a greater financing capacity than those without venture capital In the end of the article, combined with theoretical analysis and empirical test results, this paper argues that we should accelerate the development of domestic venture capital industry, the development of venture capital intermediaries, to cultivate an environment conducive to the development of venture capital to maximize the positive role of venture capital in order to achieve the purposes that by promoting the development of venture capital to promote domestic corporate financing.